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Beginner's Guide to Mortgage Protection



If you have a mortgage on your home and your family depends on you to make the payments, you may want to purchase a mortgage lien. This is a type of life insurance that is specifically designed to pay off your mortgage in the event of your death, so that your family can stay at home. Some mortgage insurance also provides benefits if you become seriously ill or disabled.

How does mortgage protection insurance work?

Mortgage protection insurance (MPI) is a type of life insurance. You buy insurance for a certain period of time (usually the length of the mortgage) and pay monthly premiums. If you die during the insurance period, the death benefits are paid directly to your lender to pay your mortgage. MPI coverage is also available that pays benefits if you become disabled and can no longer pay your mortgage. In that case, the insurance company would make your income for you. The insurance may not cover property tax and home insurance that your lender holds in custody.

How much does mortgage protection cost?

For many, mortgage protection is one of the most affordable types of insurance. Many insurers do not require you to have a medical examination to qualify. The premium is based on several factors, including:

  • Size of coverage (size of your mortgage)
  • Age
  • Health
  • Tobacco use

How does mortgage protection insurance differ from ordinary life insurance? [1
9659003] MPI and life insurance are equal in that they pay death benefits if the policyholder dies within the insurance period. However, there are major differences in these two types of coverage:

  • First, with a term life insurance, death benefits remain the same regardless of whether deaths occur early or late in the period. With mortgage protection insurance, the death benefit decreases when the balance on the mortgage loan decreases over the years.
  • Second, death benefits with life insurance are paid directly to your beneficiaries in the event of your death. Your family can use these funds for what they need, not just to pay off the mortgage. With MPI, the insurance company pays your mortgage lender, not your beneficiaries.

When should you get a mortgage insurance?

If you have health problems, you may not be eligible for competitive rates for standard life insurance. In this case, mortgage protection insurance may be an option, as no physical examination is usually required. This coverage is usually affordable and can be combined with other life insurance policies, such as coverage from your employer, to protect your family in the event of your death or disability. With an MPI insurance, you have the assurance that your mortgage will be paid off if you die within the insurance period.

Mortgage insurance can give you peace of mind knowing that your family home will be paid for if something should happen to you. It is generally affordable coverage that does not require a medical examination. Depending on the circumstances, this may not be the best option for you. Our friendly agent can advise you on how to get the best possible value for your life insurance dollars.


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